Starling takes on the big banks with business lending play

Digital challenger bank Starling is making a move for business customers, opening up a new front in the battle between start-ups and Britain’s largest lenders.

Starling - which launched an app-only current account in April that has gained tens of thousands of users - will launch a business banking service early next year.

Anne Boden, founder and chief executive of Starling and a former RBS and AIB banker, told the Telegraph that business lending had been “highly concentrated with a few big players for too long”.

“It will be very easy to get up and running, taking five minutes or less," she said. "At the moment opening a business account can take many hours at a branch. Business owners are far too busy for that.”

Ms Boden said she was disappointed RBS had avoided a forced sell-off of its Williams & Glyn arm last month, as the move would have created more competition in business banking. The taxpayer-owned bank will have to stump up a £833m fund to encourage account switching and support the sector.

Business banking is currently dominated by large lendersCredit:
Lynne Cameron / PA

Services offered with Starling’s free business account will include linked invoicing and accounting services, real-time international payments and 24/7 customer service. It will initially be designed for entrepreneurs, sole traders, and small business owners.

Starling is one of a growing band of digital-only banks capturing market share from traditional lenders, alongside rivals such as Monzo and Atom, but is the only one to offer a current account currently.

Monzo - which was founded by Ms Boden’s former Starling colleague Tom Blomfield - has nonetheless stolen a march on Starling in overall customer numbers, boasting more than 400,000 users of its top-up card, which is coloured a distinctive hot pink.

Ms Boden said she believed there was room enough for multiple competitors and that she kept in touch with Mr Blomfield: “We both think it’s a huge market and consumers need choice.”

Starling will launch in Ireland soon, where testing has already begun with select customers. It is planning a further £40m fundraising in the middle of next year to help fuel international expansion.

Monzo founder Tom Blomfield

Firms interested in Starling’s business service can join a waiting list from today, starting with a closed group towards the end of this year.

A Competition and Markets Authority study into the SME banking sector, published in 2014, found that the largest four lenders accounted for over 85pc of current accounts and 90pc of business loans at the time.

Starling also hopes to capitalise on the push towards so-called ‘open banking’ - allowing rival lenders to access a customer’s financial information with the person’s consent. An EU directive enabling open banking comes into force at the start of next year.